But one man whose home was burgled is now receiving nothing after a court found that he had lied when filing his claim about the extent of his loss.
A federal district court in California ruled that an insurance company could void the man's policy based on his "significant and unexplained misrepresentations" about an alleged burglary at his home.
After the man's home was burglarized, he reported to his insurance company that the thieves had made away with tools from his garage, $6,500 in cash and musical equipment. But it was the prices that he attached to the stolen goods that raised the insurance claims adjuster's eyebrows:
- Husqvarna chain saw, purchased at Sears and valued at $600;
- Tascam recorder, purchased online and valued at $500;
- Socket set, bought in Portland and valued at $6,000;
- Martin hunting bow, bought in Portland and valued at $1,000;
- Mackie PA system, purchased at Guitar Center and valued at $1,100; and
- Fender acoustic guitar, given as a gift and valued at $3,250.
The man said he "thought" the guitar was a Fender and he didn't have a receipt because a friend had given it to him. Then he changed his claim and told his insurance company that the guitar was actually a Martin valued at $47,999.
The insurer wanted back-up documentation and the man provided it with handwritten notes about the person who had gifted him the guitar, including his name and phone number. He did the same for a socket set he said he'd bought from an individual, but with no receipt.
While the insurance company agreed to pay for damage caused by the burglars during the break-in, it refused to pay for many of the items he'd listed as the man's story kept changing and he had no bona fide backup documentation for his "stolen" items.
Litigation ensued, with appeals
In its decision, the district court first found that the defendant's misrepresentations concerning the source, value and specifics of the stolen items had given the insurance company grounds to deny the claim and to void the policy under its concealment and fraud provision.
How to ensure your claim is paid
Report the claim promptly - If it's a burglary, you should call law enforcement first and then your insurance company to report that you've been burgled. You may not know the extent of what was stolen at the time, but at least you've made the initial report to the insurer. You'll be asked to later provide a list of what was stolen.
Document everything - Keep good records and document everything that occurs during a claim. Save receipts, contracts and appraisals, and document phone calls by writing down who you spoke with and when during the claim.
Keep a home inventory - Keep receipts of all valuables you buy, and photos of larger ticket items. Store them on the cloud on services like Dropbox or Google Docs, so you don't lose them in a fire.